Ease of application
The application process is very simple for short-term policies. Once you select a plan, the online application is much shorter than it is for standard individual health insurance, and coverage can be effective as early as the next day.
There are no income-related questions (since short-term policies are not eligible for any of the ACA’s premium subsidies), and the medical history section is generally quite short – nowhere near as onerous as the pre-2014 individual health insurance applications were.
Keep in mind that although the medical history section generally only addresses the most serious conditions in order to determine whether or not the applicant is eligible for coverage, short-term plans all have blanket disclaimers stating that no pre-existing conditions are covered.
To be clear, short-term plans are not as good as the ACA-regulated policies that you can purchase during open enrollment or during a special enrollment period. Short-term insurance is not regulated by the ACA, so it doesn’t have to follow the ACA’s rules:
The plans still have benefit maximums, and they are not required to cover the ten essential benefits. (Most often, short-term plans don’t cover maternity, preventive care, or mental health/addiction treatment), they do not have to limit out-of-pocket maximums, and they do not cover pre-existing conditions. They also still use medical underwriting, so coverage is not guaranteed issue.
And the plans are not renewable. In most states, you have the option to apply for a new policy after the first one ends (the second policy would also be capped at no more than three months in duration), but you’ll be going through the application process as a new enrollee, and any health conditions that developed while you were covered by the first policy would be considered pre-existing conditions under the second policy.
(Also, some short-term plans may not cover prescriptions. Using a pharmacy discount card may lower medication costs without health insurance, and some discount prices may be lower than an insurance copay.)
Not a qualifying event: losing short-term coverage
Although loss of existing minimum essential coverage is a qualifying event that triggers a special open enrollment period for ACA-compliant plans, short-term policies are not considered minimum essential coverage, so the loss of short-term coverage is not a qualifying event. Let’s say you lose your job and your employer plan ends at the end of July. You then have a 60-day window during which you can enroll in an ACA-compliant plan.
You also have the option to buy a short-term plan that could cover you for August, September, and October. But when the short-term plan ends, you would no longer have access to an ACA-compliant plan (you’d have to wait for open enrollment, and a plan selected during open enrollment would become effective on January 1) and although you could purchase another short-term plan, your eligibility would again depend on your current medical history.
In addition, since short-term health insurance is not considered minimum essential coverage, you’ll still be on the hook for the ACA’s shared responsibility penalty if you rely on a short-term plan for your coverage. There’s an exemption from the penalty if you only have a short gap in coverage that lasts no more than two months (you could have a short-term plan during that two months and would not be subject to the penalty).